HOW DO YOU VALUE GOLD?

 

We can tell that the stock market is historically overvalued by PE ratios, Price to Book ratios, Price to free cash flow ratios etc.

The PE of the SP is currently about 30 percent, while historical averages are closer to 18 percent.  That gives a useful valuation metric.

You can tell the value of a Credit Instrument by analyzing the quality of the debt to asset ratios of the balance sheets underlying the instruments.  Then you can guage whether the interest rates on offer are commensuate with the risks involved.

But how do you value gold?

Nobody has a decent formula for this type of valuation.

You can look at the balance sheet of the countries most in control of the global economy.  You can look at the total Debt inssuance of these countries.  You can track global liquidity flows which is the same a global debt flows.

And you can track - to some extent - Gold puchases by Central Banks, and by the investing public.

All of these are interesting inputs.  But then how do you guage the value of gold in realtion to these inputs?

That would tell you something if you could do it accurately - which would be very tough to do.

But Gold is ultimately a guage of the Stability of Global institutions.  Global politcal institutions, Global Legal institutions and Global Economic institutions.  And these are all all dependent right now, in our current era, on Debt.

There is no guage for this.

You can look at public confidence in the US congress for example which stands at 17 percent (an historical low.)  Or the Supreme court - 44 percent (near an historical low).

Again, that can't yeild any sort of metric for valuing gold.

HOWEVER - what you can do as an investor is to take an historical view of the era in which we live and guage for yourself whether overall Global Stability is rising or falling.

For example, in the Fourth Turning, Neil Howe argues that historical eras repeat and move from stability to instability and back again.  He argues we are in a fourth turning era which is the most unstable.  He, like many historians, liken our era to the era of the 1930's.

But you would need to read the argument to see if you agree.

Then in this broad context you can analyze - first and formost -  whether the leading global economies are built on stable Debt to Asset structures.  Because we live in an era wherein all economic activity is built on DEBT.  Units of account are units of Debt.  Dollars are instruments of Debt.  As are Euros and Rubles and Yen.  And Debt derivatives (economic activity in toto) are measured in the multi-quadrillions.  And most of this activity in unregulated.

If debt is careening out of control it is a certainty that stability is crumbling.  But what does out of control mean?  You have to decide that for yourself.

Then try to gauge the political will - and the poltical economic acumen - to tackle the Debt problem.  (if you agree there is a problem).

If that is truely high, stability could reassert itself.  If not, instability will increase.

I think the answer to these questions are most obvious.  So, to me, adding to my gold position at the current price (around $2600) is also obvious.  

But you have to come to these conclusions yourself and invest accordingly.

No ratios or valuation metrics will help.  And it you are American you are at a distinct disadvantage for gauging these things because the American standard of living is so much higher than anywhere else in the world.  It is only since the great financial crisis that American Standard of living has begun to deteriorate - as the US has made the decision that the taxpayer will always be on the hook for poor decision making by Banks, Shadow Banks, and corporations.  That decision in itself has destabilized the lifestyle of the average citizen in favor of preserving the wealth of the super rich.  But this is a recent developement and it will take time for Americans to realize that this is a one way bet on stability.

On top of this, the decision to allow the super rich to financialize all assets in a way that they are only available to the super rich ie through Private Equity and Private Credit is again massively destabilizing - but recent enough that few can see it.

In the end, it all comes down to common sense in a most personal sense in seeing and understanding trends that can only move in one direction until there is a Mass Will will to move another way.  But this must be preceded by a Mass Understanding which is difficult in an age where the super wealthy control the flow of information.

The only protection against these trends for the private citizen is Gold ownership.  Gold is the only asset with no Counter party risk.  Most every other country in the world sees that and is moving in that direction.  Eventually, as their lifestyle deteriorates,  the US citizens will see it too.

But if you are counting on the ratios or gauges supplied by anyone but yourself you'll go broke investing in gold because all investments are subject to short term volatility that will knock you out of your position.  The only thing that will save you from this - especially in gold where there are no reliable metrics - is your personal conviction of where the world is in the Stability to Instability spectrum.

And where it is heading.

Our NEW Secretary of the Treasury, Billionaire Scott Bessent says inflation doesn't really exist

 

Quoted from the Wall Street Journal 12/27:

"Treasury secretary-designate, said last month that tariffs wouldn’t allow businesses to raise prices in a sustained fashion.

“Tariffs can’t be inflationary because if the price of one thing goes up, unless you give people more money, then they have less money to spend on the other thing, so there is no inflation,” he said on a radio program hosted by Larry Kudlow, a former Trump adviser."

By that logic inflation just doesn't actually exist because when prices go up middle class people go broke so prices must come down.

In a way that's true in the very long run.  Massive inflation eventually leads to crushing debt deflation.

Along the way however, everyone not in the Billionaire class goes broke.  Meanwhile billionaires get richer and richer.

How?

Because inflation is the condition that allows the hard asset owning class - the Billionaire class - to have the value of their assets inflate along with everything else.  Meanwhile if milk and eggs and rent and education and health care and insurance inflate too what do they care?  It's a drop in the bucket compared to the fact that they own all the real estate and the farm land and the health care establishments and the insurance companies that are reaping the benefits.  The cost of daily life products are meaningless to them.

So when a country is ruled in every facet by the billionaire class expect inflation to be the unstated policy of the ruling class.  And expect them to try to convince you that inflation isn't really a problem.  Or doesn't really exist.

And invest accordingly.

DOGE AND GOLD

 

The Republican economy is placing a tremendous amount of faith in the ability of DOGE - a billionaire controlled department that will slice waste out of the budget to cover the 2-3 trillion dollar deficits that the republican budget will be running each year.

That's about the amount DOGE is claiming it will cut out of the deficit.

How will they do that?

Well, 80 perent of the US budget goes to paying for A) Defense - (the republicans have pledged to increase the Defense budget to modernize our weapones sytems)

B) Interest on the Debt (Even the US must pay interest on its debt), and the debt keeps growing at parabolic rate year over year.  In fact, interest on the Debt now is the single greatest component of the budget.  And as most of our debt is funded at the long end of the yeild curve  - it is impervious to all Federal Reserve actions save Yeild Curve Contorl (which would send gold to the stratosphere).  

Cand D) Social Security - and Medicaire.  Nobody will ever touch social security - for one thing it's not a transfer payment, it's money that has been payed into the government by workers and is owed back to the workers on retirement.  So cutting that is just pure theft and it is theft from the largest voting block in America.  Touching that is political suicide.  Medicaire  perhaps can be toyed with at the fringes if the ruling party again wants to flirt with political suicide.

So what does that leave?  

Well, infrastructure - which is badly delapidated in this country.  Cutting spending there will lead to terribly unsafe roads and rail systems which could cost far more in accidents than it would save.  

Veterans health care.  That would save a tiny amount while abandoning everyone who has served this country in the armed forces.

Education. That would save a tiny amount while serving to vastly increase the divide between rich and poor in this country,  That will prove to be social suicide because that divide is what is making this country the most dangerous country in the entire First World.  Most other first world countries have travel advisories in effect for their citizens travelling to the US because of violence here - especialy mass gun violence.  It is impossible to say that all the mass gun violence is due to the rich/poor divide.  But certainly some of it is.  So far I don't think a single mass murderer has come from the Billionaire class.  Maybe if we increase the amount of hopes and prayers we use to combat this plague we'll get it under control.  So far that hasn't worked very well.

Cutting education to the poorest element in society in the long run is probably the absulute dumbest thing we could do.

So good luck to DOGE.  

I'm sure they'll figure something out being billionaires.  But on the face of it it seems they'll end costing the government money simply because they are adding another government agency that requires funding. 

So I think we can pretty well count on the 2-3 trillion dollars deficits the Republicans are planning on running - as a fait accompli.  That is terrible for our economy.  But it is great for GOLD.

THE BILLIONAIRE CLASS - AND GOLD

 

Billionaires control the US Government, the US Media, the US economy.

A tech billionaire and a social media billionaire have total control over the US government.

X, Truth Social, Instagram, Facebook, Tik Tok, are all assedts owned and controlled by Billionaires.

Fox, Newsmax, NBC, ABC, Serius, are all assets owned and controlled by Billionaires

Every social messaging platform, every media influencer, every media truth, every product, every art and fashion trend are assets controlled by Billionaires.

That is total control over all discourse, all information, and over the issuance and use of all the units of account and credit that make up the US dollar backed global economy.

So if you want to understand how to invest and you are not a billionaire you have to understand what benefits the billionaire class and then hitch a ride as best you can on to their coat tails.

So what increases the value of all these assets controlled by billionaires?

LIQUIDITY.

The value of all of these assets are 100 % driven and 100 % correlated to ever increasing Liquidity.

What is Liquidity?

It is the entire global pool of fiat issued units of financial account: Dollars, Yen, Yuan, Euros, Rubel, etc produced and issued into the global economic system in the form of DEBT INSTRUMENTS.

The Total number of these DEBT/LIQUDITY instruments introduced into the Global Economic System has to increase day over day, month over month, year over year for the Billionaire class to increase its wealth.

And one thing we know for certain about the billionaire class is that their only concern it to increase their wealth.

So they need to increase global liquidity to increase their wealth.

At the same time the ever increasing global liquidity is also exactly the same thing as the ever increasing global debt.  Because liquidity is Debt.  Debt is Liquidity.  Every new dollar. yen, yuan, euro etc is introduced into the global eonomy as a unit of Debt.

And the ever increasing Debt/Liquidity introduced into the global economy is also a unit of Inflation.

As the amount of total Liquidity increases the amount or Units of Liquidity (Dollars, Euro, Yen, Yuan, Rubels etc) needed to buy everything needed to sustain lifestyle: Food, Shelter, Energy, Education, Insurance, products -  Increases in cost.  

Day over Day, Year over Year everything must get more expensive.

That means that INFLATION is the ultimate driver of the wealth of the Billionaire class.

Inflation simultaeneously destroys the wealth of evey other class other than the Billionaire class.

Of course, there is the grey area of the Super wealthy who have only a few hundred million or perhaps only 50 or 60 million so that inflation simultaneously increases the value of their assets while skyrotting the cost of their lifestyles - so that they ultimately tread water in what is a very satisfactory place.

Everyone else goes slowly broke because the cost of their lifestyle increases faster than the savings required to accumulate assets.

So the Billionaire class is faced with a very tricky narrative that  they must produce using all the Social/ Media Assets which says that we will simultaneously drive up the value of your assets while driving down the Inflation that destroys the cost of your lifestyle.  

Tricky?

Yes.  

Because this Requires simultaneously driving Liquidity up while driving Liquidity Down.

Impossible.  Yet this is the story the Billionaire class must tell their political consituents if they want to maintain control of the US government.

So how do they do this?

A) They count on the fact that almost nobody understands that Liquidity drives the entire global economy. 

B) They never mention the fact that you can not simultaneously Increase and Decrase liquidity.

C) In stead, they get everyone to focus on the minutiae of the economic system (GDP, GDI, GNI, FDI, PCE, PMI, employment figures, stock indices figures etc) without the understanding that these are meaningless outside the context of Global Liquidity.

D) Hope that everyone buys whatever absurd narrative they want to build that will prove they can simultaneoulsy fight inflation (Decrease Liquidity) while increasing assets values (Increase Liquidity).

E) They prosecute or sue into bankruptcy anyone in a position of influence who tries to contradict their narrantive.  

Currently the Narative produced by the Billlionaire class is that they will use Tarrifs to both increase liquidity by confiscating a fortune in Liquidity units from other countries (Tarrifs do no such thing.  The US consumer pays those increased confiscations) while decreasing liquidity by destroying the liquidity units other countries would otherwise accumulate selling products to the US.  (Tarrifs do no such thing - the other countries just sell elsewhere)

The fact that this is a nonsense narrative at every level is irrelevant.

They also have fastened on the narrative that the mass deportation of aliens and their families will make all real Americans richer while driving down the cost of living.  How?  That's irrelevant.

The fact that every social / media outlet hypes this narrative means that ultimately everyone will agree if possible.  Those who don't best just shut up.

The policies are simply diversions.

They are only meant to give cover to the real policy that dominates the real economy domintaed by Billionaires: Liquidity/Debt must be increased day over day, week over week, year over year.

And anything that interferes with this mass Liquidity Drive must be cleaned up/bailed out by the Central Bank whose balance sheet can and will balloon to infinity as the Liquidity Drive turns into periodic Credit Crises.

So if you are not a billionaire how do you invest for this Liquidity Economy?

There is only one asset available to the non billionaire that can withstand the erosion of the value of money and the vicissitudes of the inflation/destruction cycles that accompany the vicissitudes of the debt/liquidity  economy - and that is Gold.

Because the price of Gold is constant.  It goes up as liquidity rises.  And during the draw downs that occur during crises Gold treads water in relation to all other assets that plunge.    And then when the central bank bails out the next credit crisis with more liquidity gold rises as liquidity rises.

It is the only monetary asset that is a store of value as well as a unit of account.

That doesn't mean you can't make money in other assets if you are a brilliant trader.

But if you are simply an ordinary dude who just wants to get by and has enough savings to invest, then over time Gold is your best bet.

 

The $2600 Plateau: Wait and see

 

Gold is resting at about $2600.  It's previous resting spot was about $1600.  So a decent move in the course of a little more than a year.  What is it waiting to see?

For one thing everything but meme stocks move in cycles.  The cycle for a meme stock is straight up and straight down.  If you see anything that moves like that you can be sure it is moving on pure emotion without any underlying fundamentals.

So what are the underlying fundamentals for gold?  When you know that you know what gold is waiting to see.

A) Central Banks of the world use gold as the rerserve currency of last resort.  Many central banks have been selling dollars (US treasuries) to buy gold. These include China, India, Russia, Iran, Saudi Arabia, Turkey, UAE, Kazakstan, Poland, Rumania, Brazil, Columbia, Viet Nam etc.  

These central banks have accounted for %90 of the gold move.  So gold is obviously waiting to see how this trend will continue in 2025.  Trump has threatened all these banks with Tarrifs if they continue.  But a large part of the reason they are selling dollars to buy gold is because of the threat of using the dollar as a weapon.  So threatening to use the dollar as a weapon should have the result of accelerating the purchase of gold in 2025 if the past is any indication.  We'll soon see.

B) Gold is used worldwide as the primary hedge against the ever diminishing purchasing power of paper currencies.  Especially the dollar, the Euro, the Yen and the Yuan,  Paper Currencies are diminshed in direct preportion to debt that must be paid off in paper currencies especially by printing more and more of them thus creating more and more debt.  

As long as the Globalization movement was providing a cover for long dated debt by keeping rates low the massive printing of debt seemed like a perpetual rollover game to those fortunate enough to procure debt at rates significantly below the real rate of inflation.  (Ie the very rich - especially the US Government)

Now that Globalizaiton has reversed and the new ethos is Every Country First and Soley for ITSELF, long rates have begun to soar despite the central banks cutting the short Bank rates.  Therefor all that debt accumulated in the Globalization debt orgy that lasted 50 years has to be rolled over at higher and higher rates.  

At the same time every countrys has gotten used to running on bigger and bigger deficits that also have to be financed at higher and higher rates.

This drives gold higher and higher as all the central banks continue to buy gold as a hedge against an ultimate debt reckoning,  It's inflate or default.  Central Banks always choose inflate.

So what is gold waiting to see?  Well for one thing it needs to see whether the president of the United States is actually as divinely appointed Angel of God who can take highly inflationary actions like imposing Tarrifs and cutting taxes on the wealthy while firing and deporting much of the working poor - and achieve deflationary results.

On the face of it this is so absurd it's not worth contemplating.  But enough people  believe in it that Gold must pause to see.

I don't believe that pause will be very long.  1 + 1 still equals 2, regardless of what George Orwell may have alleged.  At least in the realm of global finance.

So it's my belief the pause won't be all that long.  Maybe a few monts.   Maybe less,

We'll soon see.

BACK TO THE STARS

 

After a brief sell off gold is back near all time highs.

All in a week,

What happened?

Theory 1: The selloff was due before the end of the year to make some kind of a low for eight year cycle.  It could be that the low is in.  Which means cyclically we're due for three solid up years.  And starting from fresh highs that would be excellent news indeed for thos long gold.

Theory 2.  Take Trump seriously not litteraly led to a brief sell off on the theory that the economy should matertially strengthen.  In a matter of days it became clear that this mantra was purely wishful thinking amongst those billionaires trying to justify voting for the tax cuts.  It is already clear that the correct mantra is take Trump quite literraly. So the economy is doomed by tarrifs, massive spending and epic ineptitude.  And gold resumed its steep uptrend.

Theory 3. Russia's upping the ante with ICBM's in Ukraine put a temporary lift under gold.  This is possible.  But anyone who can't see that we're entering a new period of global instability regardless of any short term occurences is so blind that they'd best just stay out of the markets altogether.

There may be short term "deals" or "cease fires" or "undsertandings" along the way in the Middle East, and what Russia regards as the Eastern Russian provinces (what we call Eastern Europe) and with the new China/Russia/Iran axis and the West, but the violent tensions both in terms of trade relations and hot warfare around contested borders are bound to continue unabated throughout the decade.  

So all three theory have their merits.  

Yest all three theories point to much higher gold over the next few years.

THE BIG SELL OFF

 

G0ld has crashed from about $2750 to $2550.

Is it over?  Who knows.

At the start of the year most overly bullish analysts predicted that gold could go as highas $2500 this year before embarking and the real upswing at the beginning of the bullish cycle due to commence in 2025.

So as brutal as this drop has been we're just back to this year's most bullish projections. (By analysts like Felix Zulauf, I mean, not some BOZO on the internet.)

Some "analysts" confuse - as always - correlation with causation when noticing the drop timed with the election.  Then they tried to retrofit explanations like the Trump Pease dividend or the Trump return to American Exceptionalism.

Delude yourself all you like.

Or look at the math.

The tax cut extension will add 5 trillion to the deficit.  Normal operation of the government will add another 2 trillion.  That's without mass deportations that should add at the least another trillion.  And without the expansion of the military which should add another trillion.  And the addition of at least 2 new government cabinet level departments - the Orwellian super costly "Department of Government Efficiancy" and the massive expansion of ICE that should add another few trillion more to the budget.

SO we're talking about Many Trillions of new spending while CUTTING TAXES, and crushing revenues - all as the FEd cuts short rates - and LONG RATES ARE SHOOTING HIGHER.

This has never happened to the US before.  EVER.  LONG RATES RISE AS THE FED CUTS!!!!!!

It is happening because nonody is buying our debt but us.  That is the definition of monetizing the debt.  That is the cause of massive inflation, slow growth: STAGFLATION.

It is simple math.

And if you think a Peace divident will offset that you're smoking chronic.  Because Trump has already given carte blanche to Netenyahu.  And he has promised carte blanche to Putin.

Hard to see where the peace comes from there.

Maybe it will come by Magic.

Maybe.

But then maybe 1+1 will continue to equal 2.

If so, whereever gold ends up  in the short run, in the long run it's going much much higher.

GOLD AND THE ELECTION

 

There is one enormous economic factor affecting the future of gold that nobody in th Political Sphere is talking about.  

Nobody.

But it affects the future of gold in particular and all US economic activity in general more that  anytbing else happening in the realm of Global Economics.  And the policies of neither a Democrat or Republican administration are taking this massive Global Economic Factor into account.

All of our economic woes stemming from massive deficit spending and perpetual negative real rates have been masked for the last 50 years by that fact the we have had the world's reserve currency.  So no matter how much debt we incur the rest of the world needed to buy our debt in order to have dollars as a settlement currency for oil, copper, lithium, and every other commodity.

This is ENDING.  Because of the lunacy for Tarrifs and Sanctions every country has decided to ditch the dollar as a reserve currency.  Nobody is buying our debt.  Because nobody wants to hold dollars that can be confiscated.

That is why the long dated treasuries are rising even as the Fed is cutting.

But it is a gradual process.

UNLESS we double down on tarrifs and santions.

Then the rest of the world will double down on ditching the dollar.

It is not a simple unwinding because the Eurodollar market is vast.

However, it is the most destructive process to our economy we have encountered since WWII.

And it means that inflation will reignite while the yeilds back up and up and up.

Unless somebody in our government gets their head around this.  The US dollar is screwed.

And gold will go to the stratosphere.

Unfortunately nobody running seems to have any idea what I'm talking about here.  Plenty of people in the fincial community do.  It's hard to understand why the disconnect is so great.

But gold knows.

HOW TO UNDERSTAND THE GOLD BULL

 

GOLD BULL FROM 600 BC

How to understand this rocket up move in gold?  Normal.  Things in the gold market are absolutely normal. The Fed has lost control of the Gold market, which they had systematically supressed for years as the economy loaded up with mountains of debt.  Every time they try to crash gold the central banks of the world stept in and buy.  They just don't have the muscle to compete with that.

So gold is moving according to unrestricted market forces.  Normal.

And old measures like COT releases and Elliot Waves and whatever bizarro trading methods you think can predict gold movements are all out the window.  Because we are now in the End Game of fiat currency.

MMT -     Modern Monetary Theory - which basically says that you can print as much money as you want to fund whatever you want was once a fringe left wing joke.  Now it has been embraced by both parties.  Print Print Print.  That is the mantra of Republicans and Democrats alike.  And Europeans.  They're in the same boat with the Euro.  As is Japan with the yen

It used to work better here because we had the world's reserve currency wherein we would print debt and the whole rest of the world would buy it thus subsidizing our profligacy.  They needed it as a settlement currency for oil, and all other commodities.  

But that game is rapidly eneding as the BRICS+ seek to aggressively de-dollarize.  They have stopped buying our debt.  In stead they buy GOLD.  And they craft intercountry settlement agreements for commodities - and goods - that cut out the dollar.  And Gold is the stabilizing currency behind other settlement currencies.

This is the NEW REALITY

And it is only just beginning.  Becuase of the collassal stupidity of our politicians from both parties we are about to elect a president - no matter from which party - who has ZERO understanding of this new dynamic.  They talk about Tarrifs and Sanctions.  They talk about closing our borders and demonizing other countries.  They talk about ending Global Trade.  All of which causes the BRICS+ countries which accounts for 40 percent of GLobal GDP and a much higher percent of the Global Commodity Trade to DEDOLLARIZE at ever faster rates.

And as they dedollarize the Fed loses control - not only of the GOLD market - but much more importantly to the LONG END OF THE BOND MARKET.

When they cut - as they must - regardless of inflation because they have to bring down spriraling Debt Service costs - the long dated bond yeilds RISE.  Not fall.  Rise.

This is the ultimate catastrophe for the US economy.

If you don't understand this you really should do some work to understand it.

Because it is the key to everything that will follow.

Including the continued Ascendency of Gold.

It won't be straight up day after day.  (today it's down big time - take advantage gold in on sale)

But it will be straight up Year after Year.

Until a new monetary system is agreed upon - Globally.

That will take a while.

A good long while.

Meanwhile the GOLD BULL WILL RAGE,

GOLD SOARS AS REPUBLICANS REVEAL THEY ARE ALL IN WITH MMT - JUST LIKE THE DEMOCRATS

 

The Republican Candidate for President revealed he is all for scrapping pretty much all taxes - at least those on corporations, firemen, policemen, everyone in all branches of the military including national guard, coast gard etc, as well as on tips, anyone working overtime, social security, and pretty much everything else.

So, with no income, the Federal Government must simply print up trillions and trillions to pay for anything and everything especially all those concentration camps for the evil immigrants, subsidies to all oil drillers, deportation programs and an greatly expanded military.

Add to that a massive Tarrif program that will raise the price of everything stoking massive inflation and killing global trade while the President takes over the Fed and drops rates back to Zero.

It's no wonder gold is making new highs every day.

It's hard to imagine the Democrats being a whole lot more fiscally conservative.  Escpecially when many of them have expressed the opinion that MMT works just fine.  So at least everone agrees on that.  At least everyone in US Politics.

So I really wouldn't worry about much of a pullback in gold until someone with a modicum of common sense decides to run for office in this country.

Don't hold your breath

Gold and the charts

 

I'm  not a huge  believer in technical analysis.  I think you find an investment with massive cyclical tailwinds, buy and hang on,  Like Gold: massive global printing of paper money in the form of massive debt that must be serviced creating massive printing needs creating ever more debt.  Add to that a Central Bank buying regiem as the world de-dollarizes, add to that the rise of Greedy Violent and highly erratic Madmen taking over both Werstern and Eastern governments - and mix in two hot wars - well you get the idea.

But just on a tehinical basis. Gold looks amazing. It has not risen straight up - though if you're not paying attention that how it seems.  But in reality it is rising in a series of reverse head and shoulder patterns, that sometimes evolve into cup and handle patterns,  

This is amazingly bullish as it is technically quite sustainable.

This current upward thrust to new all time highs is a marvelous reverse head and shoulders pattern that looks like it could have much farther to run.  And even if it just flattens out for some time here that would make a beautiful cup and handle pattern,

You can see the myriad reverse head and shoulders on the charts above.  The top is longer term.

GOLD AND TARRIFS

 

It's looking increasingly like a regime of Tarrifs will become the economic policy of the United States.  It's shocking that only 90 years since the last regime of Tarrifs - Smoot Hawley Tarrif Act of 1930 not only destroyed the US economy but put the entire Global economy into  a decade long depression.  

Who would want to repeat that?

Someone who has no coneption of US or Global History.

Someone who doesn't understand that Tarrifs are a massive tax on the US consumer.

However, there is a much more pernicious effect of Tarrifs at this moment in US history.

The US enjoys a mighty economic privilige: the US dollar is the GLobal Reserve Currency.  What this means functionally is that we can print money to pay our own debts - AS LONG AS THE REST OF THE WORLD WANTS TO BUY OUR DEBT.

But suddenly for the first time since World War II, much of the world does not want to buy our debt.  In fact they are selling our debt and using the proceeds to buy Gold.  They are replacing the dollar ar their primary resesrve with GOLD.

ENTER TARRIFS..  This becomes a major incentive of CHINA to rapidly increase their dedollarize campaign  and lead the dedollarization camapaigns of the rest of the BRICS+ countries which now include: Brazil, Russia, India, China, and South Africa New members: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates And 17 other countries are applying for membership.

GET IT? 

Not everyone does.  

In fact neither candidate for president seems to have any idea this is happening.

But when the tarrifs raise the cost of everything, they will also raise interest rates as other countries 
head for the exits and refuse to buy our debt.  

So the Fed will have to buy all our debt while prices are rising.

And this will make the regeim of Tarrifs into perhaps the dumbest most destrutive

economic act in the history of the US, and perhaps in Global history.

But it will be great for gold!

A STRANGE CORRECTION

 

Well, it looked like a correction.  Then the gold price popped back up tp $2650.  The problem for those waiting for this correction to get in - is that the Central Banks of the World aren't waiting for a correction. 

 They're buying.

It used to be that the Fed could manufacture a good correction simply by backing the JP Morgan trading desk which would dump as many sell orders as necessary on the Future market in the thin evening session and then in the morning everyone long would panic sell into it creating a huge downwared move.

Now, they still try it but whatever size the JP Morgan trading desk can throw at Gold, the Central Banks of China, Russia, India, Indonesia, Poland, Mongolia, Czech Republic, Mexico etc simply say the equivalent of "Goody, Cheap Gold,  I'll take some of that!"  And the price pops right up.

It used to be you could even watch the COT (commitment of trader) reports and see when the commercials were net shot and the small traders were net long and predict a good move down.

But the Central Banks don't appear in those reports.

The game has changed.

It doesn't mean gold can't correct.  Everything does eventually.

It just means all the old ways of predicting the Gold movemnet are out the window.

Because the Central Banks of the world don't want to depend on the US Dollar when the US dollar is 

A) Drowning in debt.

B) Has been weaponized through Tarrifs and Sancations.

C) Is under the control of a potentially erratic, aggressive and unpredicatble Government.

This is not my opinion.  This is the open assessment of the BRICS+ Nations that are leading the accumulation of Gold while aggressively de-dollarizing their economies.

That doesn't mean the dollar will cease to be the Global Reserve Currency right away.  That's not possible with a Eurodollar market 5 times the size of the US dollar market.  But All of the dollar Reserves is held in the form of DEBT.

But it does mean that Gold has much much further to run vis a vis the US dollar - and all other currencies.  Because it is becoming the Global Reserve Currency that is NOT A UNIT OF DEBT.  It is a PURE ASSET.  It has no counterparty risk.  (And it can not be eroded by simply printing more units of debt - like the US dollar.)

So everyone has a choice as to what reserve currency they employ.  

Debt or a pure asset.

That includes every private citizen.

That includes you.

GOLD'S LONG AWAITED CORRECTION

 

Gold has finally started its long awaited correction.  It has barely taken a pause since it launched from under $2000, had a brief snooze in the $2300 area and then hit its current level of around $2600.

The Chinese announcement that they would pause in their massive stimulus campaign sent all commodities reeling.  And the fact that Israel has not yet hit Iranian oil fields or nuclear facilities has fanned  the eternal hope for a cease fire that has tempered bets on gold and oil. 

But also, just technically, Gold is due for some kind of pullback.  Many Americans are hoping against hope it is a major pullback.  Because either their technical models have been calling for one for a very very long time or - most likely - because they missed the entire run up.

Yes, most Americans have missed the entire run up.  It has been fueled by Asia - China and Japan and India,  Both by Asian Central Banks and Asian consumers.  Throw in Russia and many of the Mid Eastern Sovereign wealth funds and you have the recipe fot this type of move.

And now many Americans are hoping for a big pullback to provide and obvious entry point into this rabid bull market.

Maybe they'll get it.  But the markets rarely ring a bell (as the old saying goes).  Maybe this time will be different.  And maybe gold will simply dip a bit and then launch higher.

We'll see.

But a few things are completely obvious:

1. Israel will hit Iran.  Iran will retaliate.  Things will get much worse before they get better.  That conflict has no solution other than complete victory by one side or the other.  Because both sides have told us that is their position.  And it's not really relevant that those not directly involved (Like the US or the UN or Europe or Russia, or some 18 year old at Harvard) may have another opinion.

That sucks for humanity, but it's good for gold.

2. In the US both candidates have promised unequivically to explode the deficit.  The bipartisan policy center estimates that the Republican budget will increase the deficit by 8 Trillion (over what base?  Who knows.) and the Democrat budget will increase the deficit by 5 Trillion.  But that doesn't take into account things that have not been budgeted for like: Getting involved in the the 2 existing wars.  Dealing with the Immigration crisis.  (In the Republican case creating concentration camps for all the immigrants and then eventually deporting them which should add many many trillions).  Dealing with the massive natural disaster crisis that is developing from climate change,   (For which neither side has anything budgeted to address.)   And dealing with the massive homeless crisis that is affecting all US cities in red and blue states.

And it doesn't take into account the Global depression that will certainly result fromTarrif Wars.

This budget crisis which is really a DEBT CRISIS - sucks for humanity.  But is great for gold.

3. The Asian central bank purchase of gold is a prelude to a gold backed settlement currency to compete with the dollar.  We know this because the BRICS+ countries have told us that that is their intention. We don't know how this will play out but it will be dollar negative and gold positive.

4.  The US investor has not yet caught on to this megatrend that will last for at least the next few years.  When the US investor (That is to say the gambling class of the worlds' largest economy) catches on gold will recieve a massive boost.

So - enjoy the pullback while it lasts,  Whether it's a scary dip or a mild dip - it's a chance to buy cheaper gold.  Take advantage while it lasts.

I doubt anyone will ring a bell when it's over.

GOLD: ANOTHER ALL TIME HIGH FOR THE ANTI MEME STOCK

 

Gold just made another all time closing high at $2625 spot.  This is still without much public participation.  How can we know?  Simple: check inflows into the ETF'S like GLD, which are anemic to non existant (The stock rises because of derivative exposure not people buying gold) - and check both availablity and the premium over spot on the big bullion sites like APMEX.  Everything is available in quantity and the premiums are historically tiny.

It's still the Central Banks that are gobbling up gold.  Because the central banks know that the dollar is being destroyed by Deficit Spending and Money Printing.  And they are preparing the ultimate de-dollarization play: the launching of a competing settlement currency.

So Gold is not a meme stock.  It is not Gamestop.  It is not Invidia which has real earnings and sales but it sells a product for which there is little real productive value at this point.  It is not Bitcoin which has no use  but soars or falls purely on investor sentiment.  It is not Apple which has wonderful products though each year it comes out with the exact same product with a few pointless bells and whistles and expect to sell it all over again to the same people who bought it last year.

No - gold is the anti-meme stock -  It is a reserve currency used by central banks to secure the liquidity of their central economy.  It is the currency of last resort.  When there are no more lenders, when the printing press (electronic though it may be) stops printing money that people want to use - the Central Authority still possesses a currency that anyone anywhere will accept in return for real goods.  Simply because they have done so for thousands and thousands of years.  It provides the ultimate fiancial stability.

Gold is the anti meme stock.  It has only use value.   

But then gold can have what Karl Marx would have called fetish value.  That is to say what we call Meme value or what used to be called vogue, trend, craze, rage, mania or fad value.  At times of stress in the system investors and traders do flock to gold.  It just hasn't happened here in the US yet.  Because here in the US we have been feasting for so long on the value that has accrued to us through the use of the world's reserve currency that we can not recognize this moment of stress that almost everyone else in the world can see.

Our government was nearly overthrown in violent revolution just a few years ago and we've totally whiteswashed the memory.  Two hot wars are raging in oil and grain producing areas that could metatstasize at any moment yet they have already moved out of the news cycle, as everything does after a few weeks of coverage.  Then it gets boring and old - to US viewers.  Becuase we're special.  Nothing touches US because we have the worlds reserve currency.

But as the world dedollarizes (while we sleep) eventually we wake up one day and realize the dollar is losing value at an alarming rate.  And it makes no difference who is in the whitehouse or who is at the Fed or what the next transformative technology is changing the world.  Because there are just too many dollars being printed and distributed to too many people for it to retain any real value over time.

And then things which are just annoyingly expensive now will be prohibitvely expensive.  LIke houses, and education and food.  We're close.  But we have no attention span.  Anyone who promises to fix the problem will be believed because we want to believe.  

But what is the solution to a debt based currency when we are drowning in debt and when any slowing of the debt produces a recession - that can only be cured by more debt?

When the average Amercian understands that this is the problem and not immigrants or blacks or jews or muslims or women with no children or strangers eating our pets then they will realize that there are only two solutions: Change the economic system which will require years of difficult adjustment or protect yourself with your personal reserve currency of last resort.

And then Americans will buy gold.  And the price will shoot ever higher.  But then the availability of REAL GOLD BULLION will disappear and the premium over spot will shoot up to 10,20, 50, 100 percent and more.  

Then Gold will become a meme stock.  Everything has its moment.

DIVERSIFICATION WITHIN THE GOLD UNIVERSE

 

Let's say you're one of the very few Investors who have bought into the Gold story. 

Though this is, at present, a story that is very much driven by Central Bank purchasing, and very few US investors have bought in - YET - let's say you're in.  But you're not sure exactly what to do to maximize the value of your position.

It's like any other investment.  You need to diversify within the Gold Universe.

How?  You prepare for the various scenarios in which gold will be needed.

These scenatios include:

A. Inflation.  This is guarnateed by the central bank driven, deficit spending driven, global economy.  Real inflation (as calculated by the metrics the government used back in the 1980's before that fancey hedonic adjustments) has been at between 15 and 22 percent for the last four decades.  Anyone alive spending money who is not a billionaire is sure to have noticed.

B. World War which ruputures supply chains, ratchets up inflation, and increases the chance of real terror inducing disruptions.  There are two significant hot wars going on where Russia. China, and US all have vital interests in the outcomes.  And it is certain China will  move on Taiwan before long.  So 3 vital hot spots that couls easilty metastasize.

C.  A strong man Autocrat seizes control of the US govenment, and takes control of the Fed which will cause a flight from the dollar, especially in the quadrillion dollar derivatives markets.  And when everyone tries to sell at once - financial markets head into crisis.  Again, the only thing keeping the world in the dollar is confidence in the Fed.  It takes a lot of heat from a lot of places.   But no one doubts that they're trying to keep the value of the dollar steady.  If an autocrat takes over the Fed, that confidence will die, and so will the dollar and this will cause havoc in the financial markets

So how to prepare?

A.  Physical gold.  You need some.  And you need it where you can get your hands on it quickly.  A nearby bank vault.  A hole the ground in your back yard.  Somewhere safe, nearby, accesible.

This will be most important for scenearios B and C.  Any breakdown in social order and you need physical gold.  And any breakdown in the financial order and physical might be your only savior.

B. Electronic gold: GLD is the biggest and  most liquid tracking stock.  This is not gold.  They own some gold along with a heavy dose of derivatives.  So in scenario A you can make money of this vehicle and it is far more liquid than physical gold.  I use it.  It's great.  In a true A/B crisis though I'd sell it in a heartbeat.  Because the derivative market can seize up in  a heart beat.

C. Collector Gold.  This market is real.  You can't really rely on experts though, except to explain things to you as you learn about it.  You have to know what you're doing.  But it's well worth learning because the market is big, real, liquid.  The trick is you have to buy and sell through dealers and auction houses.  So you have to pay retail or pay the hammer fees at auction.  Don't let this daunt you.  As the price of the dollar is destroyed through Fed/Treasury printing schemes and through a government drowning in debt that has totally given up on fiscal responsibility the value of collector coins like all hard assets keeps rising.

The trick here is to always remember its a DEMAND DRIVEN market.  Something can be rare and interesting but if nobody cares, the value won't rise.  You have to monitor the market and see what's in demand.   Then you have to get to know and understand areas that interest you and areas in which you have some familiarity through study or heritage or aesthetic appreciation.  Take the time. Learn.  It's worth it.

D, Other types of precious metal etc: Silver, Platinum, Diamonds: all of thse can work.  The problem they are all at the mercy of investor demand.  Gold is the only thing used by Central Banks as a reserve currency.  That is a very major underpinning of the market.  And for this reason, in a real crisis - only Gold is as good as Gold.

Gold is the real de-dollarization play – Nassim Taleb

 

De-dollarization has become a trending topic amid the rising strength of the BRICS bloc and surging U.S. debt. But according to one analyst, while many are focused on competing currencies or digital assets, the real de-dollarization play is gold. 

 

“People are not seeing the real ‘de-dollarization’ in progress,” essayist and mathematical statistician Nassim Taleb said in an X post. “It is not [about] trade settlements. Transactions are labeled in USD, as an anchor currency, but central banks (particularly BRICS) have been storing, that is, putting their reserves, in Gold.”

 

“Gold is up ~30% y-o-y,” Taleb highlighted. 

 

Luke Gromen, founder and president of Forest for the Trees, responded with the following chart, noting that “It's quietly been underway for 10 years; got much louder post-2022 sanctioning of Russian FX reserves.”

 

 

As Gromen mentioned, chatter about de-dollarization has been on the rise for the past several years. The decision to freeze Russian assets after the country invaded Ukraine served as a wake-up call for those who held large portions of their reserves in U.S. Treasuries.

 

Geopolitical and financial analyst Angelo Giuliano posted the same chart as Gromen, saying, “De-dollarization is happening.”

 

“Instead of buying US debt, countries are buying GOLD,” he added. “The US dollar Ponzi scheme is collapsing...the US exorbitant privilege to print endless amount of paper toilet currency is over. Gold hit an all-time high today [Sept. 12]. +30% yearly performance. Only the beginning.”

 

X user The Parabolic responded to Taleb’s post by noting that “The emerging monetary order can be summed up using Jevons' 3 key functions of money: store of value, unit of account, and medium of exchange.” 

 

“It is a historically odd and an aberration to have USDs/USTs serve all three roles,” they said. “Between 1922 (Genoa Conference) and 1971 (Nixon shock), the Anglo powers removed physical gold as the international store of value. They replaced gold with  government promises (banknotes, bonds, etc.), and the resulting debt-based system is extremely unstable, requiring ongoing quick fixes to not blow up.”

 

Taleb “shows that while the USD instruments can function as a medium of exchange and unit of account, their role as a store of value is being questioned by some of the world's largest economies,” The Parabolic said. “BRICs et al wanna take us Back to the Future.”

 

And touching on Taleb’s point that transactions are labeled in USD, author Richard Turrin noted that the “dollar's high percentage in trade settlements is increasingly meaningless,” as “1) Gold holdings show reserve storage, and 2) Migration of trade to alternate currencies isn't captured on SWIFT statistics.”

 

“The US will tout the USD's high percentage use in trade all the way to the bottom,” Turrin said.